Simple Interest Calculator Tool
Calculate Simple Interest
Calculation Steps:
Interest Breakdown:
Balance Accumulation Over Time:
Payment Schedule:
| Period | Principal | Interest | Total Payment | Remaining Balance |
|---|
How Simple Interest Works
Simple interest is a quick method of calculating the interest charge on a loan or investment. Simple interest is determined by multiplying the daily interest rate by the principal by the number of days that elapse between payments.
Simple Interest Formula
The formula for calculating simple interest is: I = P × r × t
Where:
I = Interest amount
P = Principal amount (initial investment or loan amount)
r = Annual interest rate (in decimal form)
t = Time period in years
When to Use Simple Interest
Simple interest is commonly used for short-term loans or investments where the interest doesn't compound. Examples include:
- Personal loans between individuals
- Short-term bank loans
- Some types of bonds
- Car loans (sometimes)
Example Calculations
Example 1: If you borrow ₹10,000 at 5% annual interest for 3 years:
Interest = ₹10,000 × 0.05 × 3 = ₹1,500
Total repayment = ₹10,000 + ₹1,500 = ₹11,500
Example 2: If you invest ₹50,000 at 7% annual interest for 6 months:
First convert 6 months to years: 6/12 = 0.5 years
Interest = ₹50,000 × 0.07 × 0.5 = ₹1,750
Total amount = ₹50,000 + ₹1,750 = ₹51,750
Frequently Asked Questions
Simple interest is calculated only on the original principal amount, while compound interest is calculated on the principal amount plus any accumulated interest. Compound interest grows faster because you earn interest on interest, whereas with simple interest you only earn interest on the original amount.
Our calculator automatically handles the conversion for you. If you're calculating manually: for months, divide by 12 (6 months = 0.5 years); for days, divide by 365 (180 days ≈ 0.493 years). The calculator uses exact day counts for more precise results.
Yes, this calculator works for both loans (where you pay interest) and investments (where you earn interest). The calculation is the same in both cases - just remember that with loans, the interest is an additional cost, while with investments, it's additional earnings.
This calculator is accurate for loans that use simple interest, which is common for short-term personal loans and some auto loans. However, most mortgages, credit cards, and long-term loans use compound interest, which requires a different calculation method.
Enter the rate as a percentage (e.g., enter "5" for 5%). Our calculator automatically converts it to decimal form for the calculation. If you enter "0.05" instead of "5", you'll get incorrect results (0.05% interest instead of 5%).